Program & Batch: PGDM – 2012-14Term: VICourse Name: International Business and

India’s Global IntegrationName of the faculty: Dr. Soma AroraTopic/ Title : India - United KingdomOriginal or

Revised Write-up:

Original

Group Number: 1Contact No. and emailof Group Coordinator:

7503139360/arpitchhajlani@gmail.com

Group Members: Sl. Roll No. Name1 12DM-039 Arpit

Chhajlani2 12DM-172 Wajid Ali

Mirza3 12FN-036 Bhavya

Agarwal4 12FN-142 Swatantra

Upadhyay5 12DCP-098 Saksham

Sharma6 12DCP-109 Siddhant

Kejriwal7 12IT-010 Jibak Sahu

Trade RelationsIndia- Australia Trade: Exports and Imports

(Source: http://commerce.nic.in/eidb/iecnt.asp)

India’s export to Australia contributes to around 0.78% of

India’s total export in year 2012-13 whereas India’s import from

Australia contributes to 2.67 % of India’s total import in same

year. India’s balance of trade for Australia shows the trade

deficit as India imports more from Australia in comparison to

what it exports there.

Region wise export data between India and

Oceania

S.No. Country 2008-2009 2009-2010 2010-2011 2011-2012 2012-2013

1 AUSTRALIA 657,633.39 655,895.11780,297.641,199,021.981,279,380.492 FIJI IS 39,679.98 12,645.99 12,983.10 17,505.01 22,343.323KIRIBATI REP 980 155.9 57.24 588.93 193.934 NAURU RP 52.67 38.5 50.34 102.6 1.015 NEW ZEALAND 85,696.81 121,286.29 86,784.93 120,885.16 164,682.026 PAPUA N GNA 8,950.52 8,357.45 9,979.62 17,007.10 16,220.957 TIMOR LESTE 422.42 577.85245,841.88 3,740.24 1,173.608 SOLOMON IS 408.87 443.5 518.22 576.15 826.539 TONGA 148.77 227.17 324.03 374.48 907.9110 TUVALU 2,959.92 101.87 55.98 6.96 3.2811 VANUATU REP 2,409.86 1,074.92 1,130.75 1,276.45 1,869.4512 SAMOA 317.69 676.76 693.77 1,048.23 1,085.24

  Total 799,660.90 801,481.311,138,717.5

01,362,133.301,488,687.73(Source: http://commerce.nic.in/eidb/default.asp )

Looking at the data in the above table we can conclude that

India's export from Australia averages at around 86% of the total

export from the Oceania Region. This is also the highest among

all the countries that India trades with amongst the Oceania

countries.

Region wise import data between India and

Oceania

S.No. Country 2008-2009 2009-2010 2010-2011 2011-20122012-20131 AUSTRALIA5,049,651.715,866,199.074,918,755.837,461,961.917,121,710.

962 FIJI IS 325.99 638.2 1,355.23 1,194.01 753.53 KIRIBATI REP 29.45   202.5   43.314 NAURU RP 12,396.21 7,419.64 1,892.45 7,232.8011,573.815 NEW ZEALAND 195,096.15 236,380.72 285,380.15 395,230.75379,980.436 PAPUA N GNA 103,976.04 47,716.27 98,538.61 99,677.0957,059.167 TIMOR LESTE 99.76 7.06 778.54 10,077.95 27.778 SOLOMON IS 235.78 551.4 18.58 10,772.66 8,289.789 TONGA 80.31 1.99 99.29 7.83 39.4510 TUVALU 169.64 22.38   3.98  11 VANUATU REP 3,396.47 0.04 32.94   2,939.5212 SAMOA 9.36 26.45 55.7 78.38 97.41

  Total5,365,466.886,158,963.215,307,109.827,986,237.367,582,515.

09

(Source: http://commerce.nic.in/eidb/default.asp )

Looking at the data in the above table we can conclude that

India's import from Australia averages at around 95% of the total

import from the Oceania Region. This is also the highest among

all the countries that India trades with amongst the Oceania

countries.

India- UK Trade: Exports and ImportsSimilarly, India’s export to UK contributes to around 2.87% of

India’s total export in year 2012-13 where as India’s import from

UK contributes to 1.28% of India’s total import in same year.

India’s balance of trade for UK shows the trade deficit as India

imports more from Australia in comparison to what it exports

there.

(Source: http://commerce.nic.in/eidb/iecnt.asp)

Region wise export data between India and the

European Nations

S.No. Country 2008-2009 2009-2010 2010-2011 2011-2012 2012-20131 AUSTRIA232,281.02 120,039.04 269,235.05 163,132.06 178,811.362 BELGIUM2,030,939.591,775,704.942,634,703.813,420,614.592,992,640.233 BULGARIA 33,011.76 24,128.28 31,736.99 52,059.37 85,393.394 CYPRUS114,200.89 22,192.93 19,731.40 27,275.09 29,990.765 CZECH REPUBLIC 83,299.38 84,139.40 98,190.70 130,658.51 136,792.186 DENMARK267,651.55 274,977.44 314,241.74 361,644.04 384,977.747 ESTONIA 22,455.87 13,642.83 24,135.97 56,218.14 49,983.358 FINLAND120,559.43 98,365.49 116,002.55 151,226.31 172,482.589 FRANCE1,377,671.151,799,941.282,368,748.282,202,080.312,710,585.5510 GERMANY2,919,475.352,563,293.283,071,853.523,796,531.893,940,810.5911 GREECE406,323.82 214,976.71 165,738.72 377,225.64 163,236.6712 HUNGARY199,667.93 128,182.66 96,805.13 151,592.17 176,180.7013 IRELAND203,497.12 123,564.18 122,914.98 183,649.88 210,291.0314 ITALY1,736,487.941,607,224.742,069,068.002,327,165.702,377,927.8715 LATVIA 20,389.30 22,199.04 47,109.61 46,042.07 56,673.9816 LITHUANIA 27,293.60 31,131.95 37,920.96 65,749.19 80,253.6117 LUXEMBOURG 5,138.89 2,250.22 8,562.60 4,316.70 4,465.1618 MALTA 48,608.92 331,357.88 341,332.43 409,210.72 216,176.3019 NETHERLAND2,888,996.203,030,093.803,494,970.344,390,731.745,737,255.7620 POLAND234,698.64 199,041.83 302,942.35 376,889.18 441,237.4121 PORTUGAL199,195.84 176,883.87 239,502.88 250,161.61 287,387.3322 ROMANIA228,655.44 157,495.59 194,208.21 128,460.53 154,176.2623 SLOVAK REP 16,430.93 16,889.40 27,087.36 45,324.51 58,234.1324 SLOVENIA 73,298.14 91,744.36 85,230.28 108,597.55 149,474.9125 SPAIN1,138,792.36 960,376.261,168,260.491,436,677.781,559,232.5026 SWEDEN257,963.42 225,192.81 285,789.86 395,277.85 373,527.3327 U K3,034,457.972,947,631.023,317,264.964,114,022.864,687,821.74

Total17,921,442.4

417,042,661.2320,953,289.1825,172,535.9927,416,020.44(Source: http://commerce.nic.in/eidb/default.asp )

Looking at the data in the above table we can conclude that

India's export to UK averages at around 16% of the total export

to the European Nations. This is also the highest among all the

countries that India trades with amongst the European countries.

Region wise import data between India and the

European Nations

S.No. Country 2008-2009 2009-2010 2010-2011 2011-2012 2012-20131 AUSTRIA 320,738.18 372,695.63 371,772.18 519,590.96 503,394.792 BELGIUM2,605,788.662,846,578.313,917,866.544,975,727.425,453,675.793 BULGARIA 27,187.64 15,470.76 26,266.37 47,006.33 49,112.724 CYPRUS 68,127.22 6,672.31 9,303.58 13,016.52 11,588.515CZECH REPUBLIC 218,371.15 265,889.52 307,923.80 342,663.31 350,212.176 DENMARK 218,073.47 282,876.68 215,368.79 293,219.65 294,972.267 ESTONIA 7,138.32 15,805.44 20,313.87 115,121.34 120,127.668 FINLAND 557,769.67 478,772.54 752,769.421,009,484.39 600,537.799 FRANCE2,116,519.651,982,887.291,686,657.132,082,646.002,535,102.98

10 GERMANY5,492,241.614,888,575.635,413,601.647,484,059.507,793,366.1011 GREECE 31,933.84 73,953.90 42,440.19 52,754.09 60,957.9112 HUNGARY 88,152.53 91,978.46 156,632.32 206,607.18 143,196.6113 IRELAND 110,214.16 125,774.04 118,093.36 197,493.25 270,658.1014 ITALY1,998,356.251,827,411.511,939,469.592,450,936.872,565,242.0415 LATVIA 53,692.34 73,010.77 89,981.77 66,871.38 40,251.8116 LITHUANIA 262,067.29 34,953.87 58,029.39 98,445.58 24,931.4317 LUXEMBOURG 11,413.46 16,036.65 16,720.17 26,734.14 26,256.2618 MALTA 2,332.29 5,695.97 16,398.08 20,132.20 23,130.9019 NETHERLAND 866,962.051,004,854.60 842,167.951,270,374.441,294,749.5720 POLAND 121,491.09 182,784.10 176,455.88 298,741.97 469,494.5121 PORTUGAL 25,510.32 33,587.32 38,933.10 146,020.38 206,058.0922 ROMANIA 152,425.37 107,337.24 108,139.80 217,458.14 169,303.8923 SLOVAK REP 20,913.92 19,070.39 40,001.37 42,283.53 34,438.1024 SLOVENIA 34,414.52 55,775.26 41,995.47 75,654.38 63,906.4125 SPAIN 466,128.41 519,599.75 677,619.66 865,717.33 989,376.7926 SWEDEN 888,754.71 753,098.69 736,767.34 921,359.17 915,570.2427 U K2,676,770.802,112,542.802,456,169.403,409,393.873,423,118.44

Total19,443,488.9018,193,689.4020,277,858.1727,249,513.3228,432,731.91(Source: http://commerce.nic.in/eidb/default.asp )

Looking at the data in the above table we can conclude that

India's import from UK averages at around 12% of the total import

from the European Nations. This is also the highest among all the

countries that India trades with amongst the European countries.

Regional Trade AgreementsIndia – Australia Trade AgreementIndia - Australia Trade Agreement can be explained effective

under 10 point plan for trade and investment

• Indian tariff rates and trade barriers generally remain among

the highest in the world

• Indian Government Committed will go for deregulation of services

sectors, including Telecom and Information and Communication

technology (ICT)

• Private sector investment and cooperation will be roped in to

drive the future of the Australia India relationship

• $130 million has already been invested by Australia-India

Strategic Research Fund

• Addressing challenges such as food and water security, health,

energy and environment will be given its due importance

• Australian Government would offer clear and consistent policies

for temporary and permanent residence for skilled and knowledge

workers

• Steps will be taken to ensure smooth processing and approvals of

requirements by investors

• A clear, transparent legal and business operating framework will

be put in place to continue trade and investment in India

• Support will be provided to other niche and emerging industry

sectors, such as biotechnology, alternative medicines, tourism

and eco tourism etc. for sustainable future trade relations

• Australian resources and energy exports to India will continue to

serve as a crucial factor for India’s economic growth

• India and Australia will be working closely together as the Chair

and Vice Chair respectively of the Indian Ocean Rim Association

for Regional Cooperation (IORARC).

India – UK Trade AgreementIt was inaugurated in New Delhi in 2005. It was launched by Shri

Kamal Nath, Union Minister of Commerce & Industry and Ms.

Patricia Hewitt, UK Secretary of State for Trade & Industry, this

agreement wanted to strengthen and deepen bilateral relationship

and identify obstacles and opportunities for increased bilateral

trade and investment.

India and EU Broad were part of “Based trade and

investment agreement” (BTIA). Their negotiation started in 2007

and is in the final lap of discussions. The theme was to promote

bilateral trade by removing barriers to trade in goods and

services and investment across all sectors of the economy.

WTO’s role in Trade relationsIndia – UKIndia and UK are active members of WTO and shown an active

participations in all WTO institutions. Both the countries played

a very crucial role in Doha development agenda as they provided

necessary inputs to improve the WTO rulebook on subsidies to

ensure that developing countries can provide the necessary

subsidies and still remain in the limits set by the WTO. Along

with this, both countries also played a major role in governing

the use of trade defense instruments and also in updating the

rules regarding the trade facilitation among various members of

WTO.

In spite of WTO playing a major role in implementing various

agreements to facilitation among India and UK, there are still

some issues that have to be resolved. Two most contentious issues

are:

1. Tariffs laid on the trades are still beyond the permissible range

set by the WTO which still plays a hurdle in the trade relations

of India and UK.

2. Another major issue that needs an urgent solution is TRIPS issue

which needs to be resolved at earliest.

India - AustraliaWTO has played major role in implementing the major agreements

between India and Australia as WTO facilitated the process of

streamlining the custom procedures that have been on the priority

list of both the governments and the international trading

community. Both the countries are the signatories to the WTO’s

Customs Valuation Agreement and the International Convention on

the Harmonized Commodity Description and Coding System. This

agreement provides for the creation of a uniform system of

customs valuation, duties and documentation in all ports of entry

in signatory countries Under WTO set rules, members also have

option of trade remedies like anti-dumping, countervailing duty

and safeguard measures in certain situations where imports cause

or threaten to cause injury to the domestic industry in the

importing country. It allows both the countries to take remedial

steps to address the damages causes by such situations.

FDI RelationsIndia – UK FDI RelationsIndia and UK along with being major trade partners has also a

very good relationship in terms of FDIs. According to the latest

annual report of RBI, this published in August 2013, UK stands at

7th position in terms of FDI inflows in last 5 years. This list is

topped by Mauritius and followed by Singapore.

(Source: Annual Report, Reserve Bank of India, August 2013)

According to this report, FDI inflows from UK has increase

manifolds in last 2 years as in 2011-12 it has increased to

$2760mn as compared to $538mn in 2010-11. This shows the strong

investment relation that India shares with UK. DIPP report on

country-wise FDI inflows during 2000 – 2013 also supports this

strong investment relation between India and UK.

(Source:http://dipp.nic.in/English/Publications/FDI_Statistics/2013/india_FDI_M

arch2013.pdf)

According to this report, UK stands at 3rd position in terms of

FDI inflows during this period of 13 years starting from 2000.

During this period, UK has invested around $19431.69mn in India

which comprises around 9.49% of total investment in India by

various foreign countries. On the other side, India is also one

of the major contributors to UK’s FDI inflows. According to one

of the European commission reports, India invested around €10bn

in EU.

Foreign direct investment 2011, € billions

Year Inward stocks Outward stocks Balance

2011 10.1 46.4 36.4

(Source: Chart

India – Australia FDI RelationsAccording to DIPP report mentioned above, Australia ranked 22nd

among the nations who have invested in India during 2000-13

period. During this period, Australia invested around $553.44mn

in India which is 0.27% of entire FDI inflows in India during

this period. If analyzed year-wise, Australia investment in India

since 2000 remained low and constant. Due to 2008 crisis,

Australia’s share of FDI investment in India reduced to 0.2%

which is only about $21.2mn as compared to other nations.

Australia’s investment during these years was mainly targeted

towards Service sector and metallurgical industries which is

about 23% and 21% of Australia’s total investment in India

respectively. Along with these 2 sectors, telecom, consultancy

services, automobile and tourism sector contributed around 75% of

Australia’s investment.

Economic Crises of Australia and Bilateral Tensions with IndiaAustralia has been one of India’s prime partners in terms of

trade. The gross financial liabilities to GDP ratio is extremely

low with Australia, making it a very safe destination for

investors and a thriving economy to draw investments from. It

also means that Australian companies can draw a lot of debt from

financial organizations as the credit rating of these firms are

considerably high.

However, a closer look and analysis into the latent economic

factors show that all is not well with the Australian economy. A

shrinking labour force participation rate has been Australia’s

cause of concern for a long time now, and the situation is

deteriorating day by day. And despite the labour force being

inadequate to sustain the growth of the Australian economy, the

unemployment rate has shot up to an alarming rate of 10.1% in the

last fiscal. Hence, questions are being raised about the

sustainability of Australia’s long term growth potential.

Apart from that, Australia’s economic policy has recently drawn

severe flak due to the factual data portraying a much more

alarming picture than forecasted. The fiscal deficit during the

past fiscal has been 40% higher than what was projected: while

the projection was estimated at 18 billion Australian Dollars,

the actual fiscal deficit has turned out to be no less than 30

billion AUD. Keeping these factors in mind, an analyst at Societe

Generale London has been quoted as “Australia is a leveraged time

bomb waiting to blow”.

Bilateral relations between India and Australia have often been

strained due to alleged racism issues: time and again Indian

students studying in Australia have been assaulted for their

ethnicity: these incidents leave an effect on the bilateral

relations and trade is indirectly affected by these incidents.

Economic Crises of EnglandEngland has had a pretty worrisome 2013 so far, and things are

not looking up for them as the year draws to an end. At the very

beginning of the year they lost their AAA rating from Moody’s,

making it difficult for them to draw investors. Their

unemployment rate, standing at 8%, is lower than Australia’s, but

is not forecasted to change before 2016, making it another

concern for the government and the economic policy makers.

UK has been known to be inelastic to the effects of recession,

unlike Australia, and this has been observed during and after the

economic crisis of 2009. Trade between India and UK dropped by

24%, and it took two years for the trade volume to regain its

former position. This is in stark contrast to Australia’s trade

with India, which actually rose in 2009.

However, GDP is forecasted to grow at a decent rate during the

next two fiscals- GDP growth is projected to grow at a faster

rate than till now since the economic crisis of 2009. This gives

investors some relief and for England, this means that

unemployment and the lowering credit rating can be encountered in

the near future. Not only that, consumer spending is supposed to

double to almost 5% in the next fiscal, as compared to the

present fiscal.

2013-14 2014-150

2

4

6

Projected Growth in Consumer Spending

Projected Growth in Consumer Spending

2013-14 2014-150

0.51

1.52

2.5

Projected GDP Growth

Projected Growth in GDP

SummaryThe following is the summary of the trade parameters for India,

UK and Australia.

Trade parameters India UK Australia

Non- Mercantile

Trade-11243.9 -15644.19 -8563.84

External Debt 390048 -96491.8 1252243.6

Foreign Direct

Investment1616 42663.1 52581.75

Terms of Trade 113 99.7 91.5

Balance of Trade -10556.1 -5253.31 -266.8

Exports 27271 67101.9 25654.88

Imports 37827 72355.2 25921.68

Source: http://www.tradingeconomics.com/

Analysis of TradeThe balance of payments consists of two main components i.e. the

current account and the capital account. The current account can

be further divided in terms of the mercantile goods and non

mercantile goods. The balance of trade is defined as the

difference between the monetary value of country’s exports and

imports of mercantile goods. It forms a major component of the

current account. Current account can also be defined as the net

change in foreign assets. It forms a major parameter while

analyzing trade between two countries and hence it’s given a

weight of 0.40 on 1. While comparing US and Australia in terms of

current account, the CAD is lower in case of Australia and hence

given a rating of 4.

External debt is the portion of country’s borrowings that is

taken from foreign debtors. These can be banks, corporate or

international financial institutions. The external debt of any

country is tracked by the International Monetary Fund. A high

external debt leads to harmful effects on the economy. UK is

having negative external debt and it is able to meet its current

and future debt service obligations if any while allowing a

satisfactory level of economic growth.

FDI is an investment made by an individual or company of one

country into the other country. It can be in the form of

Greenfield investment or Brownfield investment. The entities

which make significant investment overseas have influence over

the operations of the company in which investments are made. An

increase in FDI can be linked to improvement in economic growth

due to inflow of capital and other resources in the host country.

It also creates employment opportunities in the host country.

Hence its given a weight of 0.3 on 1. It’s clear from the summary

table that Australia has the highest FDI and is given a rating of

4.

Terms of Trade measures the ratio of export prices to import

prices. Hence it gives a measure of the total amount of goods

that can be imported for a unit amount if exports. The terms of

trade is close to 100 for UK and hence given a better rating than

Australia.

Factors Weight UK Aus

Non- Mercantile Trade .20 2 4

External Debt .15 5 1

Foreign Direct Investment .30 3 4

Terms of Trade .15 4 2

Balance of Trade .20 2 5

Total Rating 1.00 3.05 3.45

ConclusionIndia and UK

• UK is benefiting from Indian companies and hence investment is

higher than the rest of the EU.

• Reductions being made to corporation tax in the UK (lowest in the

G7), UK stands to be the most lucrative option for India.

• Participation in the National Investment and Manufacturing Zones

(NIMZ) by UK companies to be developed as green field industrial

townships and benchmarked against the best manufacturing hubs in

the world.

• Participating in the establishment and operation of ITIRs in

Karnataka through UK companies via equity, technology, financing

mechanisms and investment by private equity.

• U.K is one of the major partners in the 1,000km Bangalore to

Mumbai economic corridor project which will transform part of

India into one of the most vibrant, pioneering and flourishing

regions in the world.

• Working towards equitable low carbon economy.

India and Australia• India can benefit from the expertise of Australia in the field of

ore extraction and mining practices by implementing its

technology. Both the countries can partner on common areas of

interest such as mining technologies, export of minerals and

fuels and energy related investments.

• Medical Tourism is one of the fastest growing segments of Indian

Tourism due to low cost treatments available in India. Indian

Corporate Hospitals have skilled workforce and outstanding

infrastructure and at par with international standards.

Australian patients can visit India and avail the world class

facilities at affordable prices and foster India’s Tourism.

• The maritime industry in Australia has strong records in

construction, support and integration of naval vessels along with

their subsystems. It is an internationally competitive sector of

Australia and hence can provide value added and highly

competitive solutions to the Indian Maritime sector.

• Australia can help India towards reducing the dependence in

fossil fuels and work towards a low carbon economy. Australia and

India has signed a supply deal previously of Liquefied Natural

Gas from the Gorgon Project. The 20 year deal was a joint venture

between Exxon Mobil Corp and Petro net. Thus increasing the

focus on clean sources of energy.

• Education is yet another sector where in both the countries can

benefit from each other.